Tuesday, May 28

Automobile Industry

After much commotion of its predecessor will cease by the end of this month, a new regime for automobile development is in the making. The stakeholders unanimously agreed upon the decision of how competition could be amplified and how the automobile market could be expanded in size. In Islamabad, the current dispute arises because of incentives. Different automakers are demanding incentives based upon the materials in their product line and those in the pipelines. This article presents an idea to ascertain what the best approach would be for the country—keeping in mind the domestic needs and the best global practices—whilst the future of the automobile industry is kept in mind.

The first target is to make small cars reasonably priced. The government subsided the duty and taxes for cars up to 850 ccs manufactured in Pakistan. The GST is reduced to 12.5 percent; FED is abolished, and duty structure is rationalized. A brilliant idea as this will make the already assembled cars cheaper by around 10 percent and will open a new road for new cars which will undeniably boost sales in the escalating middle class.

However, there are many automakers in Pakistan who do not have engines ranging from 850 ccs and below and are seeking the incentives of the cars to be brought up to 1000 cc. This could be proved favorable, as a new structure for the incentives may bring about more options. Despite this, a real push is needed in 800-1000 cc where the middle-class buyer looks for a Mehran as the most suited.

The government however should be strict when giving out loans and an effort should be made to calculate the demand as well as the supply dynamics. If supply falls short and the demand rises, it will give the investors a chance to jump in and claim

A premium from the purchaser. This way government loses tax revenues and customers don’t buy cars at an affordable price.

The auto industry is proposing that the government should do away with ACD and FED altogether. It makes sense to charge FED on a product that government wants to boost. But removing these duties altogether may be hard and disrupt prices which would make the secondhand owners be at a disadvantage. An immense shortage of semiconductors (chips) in the market is leading to existing cars being delayed. Lower prices could hold up more orders as the demand spikes up.

Another major hot subject is incentives on electric vehicles (EV) and Hybrid Electric Vehicles (HEV). The making of EVs and HEVs is both halves in percent. But the HEV imports have a better tax and tariff advantage.

Looking at the GST and battery sizes, it seems that the HEVs are more in favor of the government and would do everything the HEV folks want. Which clearly is not a logical regime.

HEVs are thought of “connect” innovation—presenting the electric element while additionally giving the market sufficient opportunity to make the EV and charging foundation open and accessible for the genuine shift to occur—from the inner burning motor to EVs. To genuinely

accomplish outflows, going totally electric is the best way to do it. What’s to come is in hydrogen fuel vehicles – energy unit electric vehicles (FECV). This load of alternatives is cleaner with a lower carbon impression out and about. Inside all, FECV is innovatively awesome.

Having said that, the public authority ought to be cautious in its EV strategy by zeroing in on climbing the innovation stepping stool and not be hindered by needing to satisfy everybody. Truth be told, a similar motivator treatment allowed to HEVs as EVs might accomplish more mischief than anything.

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